Comparison And Application Of Portfolio Risk Measurement Models VaR, CVaR And WES

With the development of financial globalization and economic integration, the environment of the global financial market is changing rapidly, and various factors make the risks are more and more uncertain. Lack of effective risk management is one of the most important reasons for frequently financial crises happened. How to against and defuse the risk of the financial market has become a major problem of financial academics and regulators, and also make the analysis of the financial risk, quantitative calculation method, and empirical research becoming more and more important. In addition, how to establish a scientific and effective portfolio risk measurement model to measure the financial risk, how to design an efficient algorithm to easily solve the portfolio models, how the risk measurement assist investors to make the optimal investment decisions, how the regulators management the financial risk, these problems are the key and hot issues in research field of finance in recent years.The theory and application of the portfolio and risk measurement model are an important research direction in the field of Finance in these years. Mainly it including different risk measurements and there models. One of the most representative part are the measurements of value-at-risk (VaR), coherent risk measure, convex risk measure and conditional value-at-risk (CVaR) model. Value-at-risk is widely used in risk management, but because of some disadvantages of the value-at-risk, the study of the optimization value-at-risk has aroused many interests among researchers. Subsequently, CVaR and Weighted Expected Shortfall (WES) have compared with VaR, reflect the potential risk of portfolio, and can reflect the different risk preferences of investor in different investment choice, and it should be more reasonable in the practical application.In this background, this paper mainly study about the VAR, CVaR and WES models in the development of portfolio theory and comparative study between in empirical research and in theoretical analysis. Through the research, the portfolio risk measurement and models can estimation financial risk reasonable and effective, it can help the investors to make the optimal investment decisions. Firstly, this paper introduces the basic concept and some literatures about the development of portfolio theory. Secondly, we introduce the three modern portfolio risk measures and models, the model is established and compared with the advantages and disadvantages. Then based on these models, because of the CVaR and WES are the nonlinear models, it's hard to find the optimum solution, so we design a genetic algorithm. According to the new algorithm designs, we using genetic algorithm to calculate the models. The stock data followed by wind database from Shenzhen Stock Exchange, choose 10 stocks randomly in 60 days. Use the portfolio models and algorithms we have already established, and with the help of computer application Matlab. We can get the results of the value of VaR, CVaR, WES, and can choose the best portfolio between the stocks. Moreover, for the financial market risks and opportunities coexist at the same time, the investors put forward the advice and recommendations in the aspect of risk management, mainly including portfolio selection, risk diversification, and strengthen comprehensive risk management. Finally, we summarizes and prospects this article.